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SR 08-14-2018 3E City Council Report City Council Meeting: August 14, 2018 Agenda Item: 3.E 1 of 6 To: Mayor and City Council From: Susan Cline, Director, Public Works, Civil Engineering Subject: Award Construction Contract for 2018 Water Main Replacement Recommended Action Staff recommends that the City Council: 1. Award Bid #2464 to Michels Pipeline Construction, a Wisconsin-based company, to provide construction services for the 2018 Annual Water Main Replacement Project; 2. Authorize the City Manager to negotiate and execute a contract with Michels Pipeline Construction, in an amount not to exceed $5,058,792 (including a 15% contingency); 3. Authorize the Director of Public Works to issue any necessary change orders to complete additional work within contract authority. Summary To maintain the safety and reliability of the City’s water deliveries to Santa Monica homes and businesses, pipelines nearing the end of their useful lives need to be replaced. As part of the Annual Water Main Replacement Project, the Water Resources Division routinely replaces water mains, typically focusing on replacing the oldest, to ensure an adequate, high quality, and reliable supply of water to customers. Staff recommends Michels Pipeline Construction, a division of Michels Corporation, to provide construction services for the 2018 Annual Water Main Replacement Project (Project) in an amount not to exceed $5,058,792. Discussion During the past several years, the City has allocated an average of $2 million per fiscal year for water main replacement projects. The $2 million budget supported a 200-year replacement cycle, meaning pipelines were expected to last 200 years before being replaced. On November 22, 2016, City Council authorized an increase of $2 million per fiscal year (for an annual allocation of $4 million) for the Water Main Replacement 2 of 6 Program. This increased investment in the City’s water main replacement capital program was intended to replace 10,000 linear feet of water main and reduce the pipeline replacement period from a 200-year cycle to a 100-year cycle as recommended in the 2014 Sustainable Water Master Plan. However, the latest water main replacement bid results received by the City revealed that a $4 million annual budget is no longer sufficient for a 100-year replacement cycle. Table 1 illustrates the bids received for water main replacement projects since 2010. Table 1 – historic bids for City water main replacement projects Project No. Project LF Low bidders Total Cost Ave. cost per LF SP2464 2017-18 5,750 $ 4,398,950.00 $ 765.03 SP2429 2016-17 - EPA 4,805 $ 2,467,000.00 $ 513.42 SP2383 2015-16 - Ocean Avenue 2,370 $ 1,496,438.00 $ 631.41 SP2297 2014-15 11,465 $ 4,132,341.00 $ 360.43 SP2127 2011 11,730 $ 2,208,850.00 $ 188.31 SP2214 2010 - Third Court 2,010 $ 838,894.00 $ 417.36 Significant cost increases materialized since the development of the Sustainable Water Master Plan in 2014. Fluctuations in yearly costs can be attributed to many factors including project scope and requirements, pipe locations, labor cost, and the construction market. Staff met with the contractor to discuss the cost drivers, and the feedback received is summarized in Table 2. Table 2 – Construction Factors Affecting Water Main Replacement Costs Factor Description Effects Geographic Location Travel times in and out of the City are long. Labor is more expensive because contractors pay employees for their travel time (but it’s not “productive, on the job time”). Trucking costs are higher due to the longer travel times. Majority of construction labor forces, material suppliers, and landfills are based well outside the West Los Angeles vicinity. 3 of 6 Project Requirements Distribution lines generally run in the alleys, where there is limited space for the contractor to work. Limited space restricts the contractor’s production rate. It also requires that the new mains be located in the same location as the existing, which necessitates the use of a temporary high line (as opposed to leaving the old main operational while the new main is installed). Trench Backfill Concrete slurry backfill (slurry) is specified for trench backfill. Slurry is a strong backfill material, but it is expensive. The use of slurry requires that the spoils be hauled away and slurry be hauled in (see location above). Traffic Control This includes engineered traffic control plans in the project’s bid package. The engineered traffic control plan results in a costlier site set-up for the contractor. Its geographic location is beyond the City’s control and the need for a temporary high line in project requirements is dictated by the location where pipe segment needs to be replaced as explained in table 2. Although the cost for this specific project does not reflect a 100-year replacement cycle, staff would pursue updating the City’s trench backfill and traffic control requirements to influence positive cost impacts under this contract and future replacement projects. This Project would replace 5,570 linear feet of water mains, 141 domestic service lines and meters, 14 fire service lines, 11 fire hydrants and 59 water valves in the following street segments: Street Name From To Linear Feet Pico Blvd 4th Street Main Street 1,000 7th Court Santa Monica Blvd Broadway 700 Pier Avenue Main Street 2nd Street 370 Fraser Avenue Neilson Way Ocean Front Walk 700 Hart Avenue Neilson Way Ocean Front Walk 700 Wadsworth Avenue Neilson Way Ocean Front Walk 700 4 of 6 City staff selected these segments for the replacement for 2018 Annual Water Main Replacement Project using the information gathered from the Business Case Evaluation Study Report, Video Inspection and Pipeline Condition Assessment Report, and the City’s maintenance records (Attachment A). Vendor Selection Bid Data Bid Posting Date Bid Posted On Bid Advertised In (City Charter & Municipal Code) # of Vendors Downloaded # of Submittals Received Date Publicly Opened 5/31/2018 City's Online Bidding Site Santa Monica Daily Press 53 6 7/3/2018 Submittals Received Vendor Selection Recommendation Michels Pipeline Construction $4,398,950 Municipal Code SMMC 2.24.072 Sully-Miller Contracting Company $4,650,000 Evaluation Criteria Price, previous experience, ability to deliver, quality of product, and compliance with City specifications. Colich and Sons, LP $4,762,350 Blois Inc. $4,802,401 Best and Lowest Bidder Michels Pipeline Construction Dominguez General Engineering $4,930,400 Mike Perlich and Sons, Inc. $5,479,900 Best Bidder Justification Bids were evaluated based on the criteria in SMMC 2.24.072, including price, previous experience, ability to deliver quality of product and compliance with City specifications. Michels Pipeline Construction has completed numerous similar pipeline projects for various agencies throughout the United States. Locally, Michels Pipeline Construction Vicente Place North Ocean Avenue Appian Way 350 17th Street Robson Avenue Pier Avenue 1,050 Total 5,570 Feet 5 of 6 have been providing water main replacement services for the cities of Pasadena and Santa Ana. Staff contacted the cities of Pasadena and Santa Ana, and respondents reported that they are satisfied with Michels Pipeline Construction’s performance and the projects are progressing on schedule. Public Outreach If the Project is approved, City staff would provide public outreach during construction, including distributing notifications to adjacent properties and surrounding communities on the scope of the project, potential impacts and the schedule, with additional periodic updates. Past Council Actions November 22, 2016 (Attachment B) Authorized an increase in CIP budget appropriation of $2 million per fiscal year (for a total annual allocation of $4 million) for the Water Main Replacement Program November 28, 2017 (Attachment C) Authorized the City Manager to negotiate and execute a professional service agreement with Cannon Corporation for the design of the Water Main Replacement Project. Financial Impacts and Budget Actions Staff seeks authority to award a contract with Michels Pipeline Construction, a division of Michels Corporation to provide construction services for the 2018 Annual Water Main Replacement Project. Contract Request Request Amount FY 2018-19 Budget CIP Account # Total Contract Amount $5,058,792 C5004840.689000 $5,058,792 6 of 6 Prepared By: Tom Shahbazi, Civil Engineer Approved Forwarded to Council Attachments: A. City of Santa Monica 5yr CIP Business Cases Evaluation Study Report B. November 22, 2016 Staff Report C. November 28, 2017 Staff Report D. City of Santa Monica Oaks Initiative Disclosure Form City of Santa Monica Water Resources Division Five Year Capital Improvement Program Business Case Evaluations October 2011 8614014 City of Santa Monica Water Resources Division Five Year Capital Improvement Program Business Case Evaluations Contents Executive Summary 1 California Incline Water Main 2 Northwest Quadrant Water Mains 9 Pier Water Mains 17 Southeast Quadrant Water Mains 25 Southwest Quadrant Water Mains – Ocean Front 32 Southwest Quadrant Water Mains – Inland 40 Northeast Quadrant Water Mains – Broadway 48 Northeast Quadrant Water Mains – City Forces 55 Northeast Quadrant Water Mains – Wilshire 62 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Five Year Capital Improvement Program Summary This five year capital improvement program (CIP) contains business case evaluations for nine projects or variations of projects. The appropriate business case evaluation documents are contained in the following pages. Below is a summary of the projects proposed, their recommended options, and the budget requirements for the recommended options. Refer to each project’s business case evaluation for details about the project background and details. Requested project budget for next 5 years Project Title Option FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Project Total California Incline Water Main Replace $200,000 $300,000 $0 $0 $0 $500,000 Northwest Quadrant Water Mains Replace $0 $0 $0 $0 $717,000 $717,000 Pier Water Mains Status Quo $1,000* $1,020* $1,040* $1,061* $1,082* $5,203* Southeast Quadrant Water Mains Replace $900,000 $900,000 $900,000 $900,000 $900,000 $4,500,000 Southwest Quadrant Water Mains – Ocean Front Replace $0 $0 $2,100,000 $0 $0 $2,100,000 Southwest Quadrant Water Mains – Inland Replace $0 $0 $0 $1,044,900 $0 $1,044,900 Northeast Quadrant Water Mains – Broadway Replace $0 $1,500,000 $0 $0 $0 $1,500,000 Northeast Quadrant Water Mains – City Forces Replace $52,500 $240,000 $191,250 $0 $0 $483,750 Northeast Quadrant Water Mains – Wilshire Replace $0 $0 $0 $600,000 $0 $600,000 Total $1,153,500 $2,941,020 $3,191,250 $3,192,290 $1,618,082 $11,450,853 *FUNDED OUT OF O&M BUDGET City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: California Incline Water Main Replacement Project Description: Approximately 1,700 feet of 12-inch diameter cast iron water main pipe along the California Incline is nearing the end of its estimated useful life. For this reason, this segment of pipe has a high probability of failure, which may cause property damage and social repercussions in the surrounding area. WRD would like to take advantage of the opportunity to replace the main line at the same time as an imminent project that will restore the incline and the bluffs. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 03/09/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings Replace the water main with 12-inch diameter ductile iron pipe during the reconstruction of the surrounding bluffs. This will reduce the business risk exposure by more than $6 million dollars. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $6,704,455 3 2012 $506,000 $0 $5,200 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: The existing cast iron pipe has an estimated install year of 1900 and is assumed at risk of structural collapse, however, no physical inspection of the pipe has occurred. A pipe failure in this area would cause flooding for local homes and a possible landslide. Water would flow down the incline and onto Pacific Coast Highway, causing safety hazards to traffic and beach-goers. Known Alternatives: 1. Status Quo / Base Line – This alternative involves continuing to monitor all segments and to test for adequate fire-flow pressures. 2. Replace the asset using a contractor. Key Project Considerations: 1. The consequence of failure on this project is extremely high due to the location of the asset and the areas and property it would affect. 2 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 3. The timing of the project will coincide with planned work on the bluffs surrounding the asset. This project’s timing gives an opportunity for an asset upgrade without added outreach with neighborhood groups and other entities. Since work will be completed at the same time as another project the City can reduce costs. 4. Adding additional tie-ins to the existing cast iron pipe is a possible problem that could arise in the future. If more tie-ins are required in this area, the existing cast iron pipe may not be structurally adequate for the additional tie-ins, consequently, changing the pipe material during this project would eliminate this issue. PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is a cast iron pipe assumed to have been installed around 1900. It has a design life of 80 years. This segment of water main has no break history that can be determined from Hansen data or staff knowledge. Current Demands (Capacity and Utilization): The current pipe is one of two providing potable water to the beachfront area. This pipe is required redundancy in the looped system and is needed to meet continuous water demand. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for a failure in this pipe segment. The capacity of the pipe will not be increased and no future growth or increased demand will be accommodated as result of this project. 3 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality. Based on the age and material of the pipe, it has a high probability of breaking, leaking, or other structural issues resulting in local flooding or property damage. Timing of Failure The cast iron pipe is about 110 years old, with an expected life of 80 years. The asset is assumed to have reached its imminent failure mode. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $20,316,500. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 10,000 tourists and commercial customers could be affected with the spilled water for 3 days and millions of dollars in damages to non-SMWRD assets and property could occur. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option is the base case. It assumes that no changes are made to the ongoing operation and maintenance of the asset. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A - Current pipe has no problems needing repair. 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contract. 7. Decommission N/A - Pipe is required redundancy of looped distribution system to beachfront area. 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 4 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo Design Life: 3 Analysis Period: 3 Capital Requirements: $0 Operations Requirements: $1,530 Maintenance Requirements: $1,530 Business Risk Exposure $6,704,445 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $506,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $203,165 Overall Pros Extended life of asset. Reduced probability of asset failure. Project can coincide with another project taking place. Overall Cons High capital costs. 5 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Business Risk Exposure Comparison: ASSUMPTIONS / COMMENTS For BRE, because there is no maintenance history, we assumed there will be two repairs per quadrant for the life of the assets, costing $10,000 for each repair. 6 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace the existing pipe with a 12-inch diameter ductile iron pipe during the reconstruction of the surrounding bluffs. This option will reduce the business risk exposure of this asset from over $6,000,000 to roughly $200,000. Utilizing the confirmed project to restore the bluffs in the area saves costs that WRD would otherwise have to incur such as traffic control and detours. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $200,000 $300,000 $0 $0 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $200 $202 $208 $212 $216 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. 7 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 8 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: NW Quadrant Water Main Replacement Project Description: Approximately 400 linear feet of cast iron pipe installed in 1910’s and 1950’s, 1760 linear feet of cement lined, cast iron pipe installed in the 1920’s and 1960’s, and 230 linear feet of stainless steel pipe installed in the 1920’s are reaching the end of their useful lives. Some of these pipe segments are 6 inches in diameter, which is below the minimum city standard of 8 inch diameter. For this reason these pipe segments have a high probability of failure. WRD would like to take advantage of the opportunity to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace all segments by contractor. The pipes are believed to be in poor enough condition to warrant replacement and the added consideration of insufficient pipe diameter also warrants replacements. This option reduces the business risk exposure by 92%. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $2,932 8 2016 $717,000 $0 $7,370 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Water main lines in northwest quadrant of Santa Monica are reaching the end of their useful lives. Some of these pipes, installed in 1910s and 1920s, are facing a structural problem. Some other younger pipes are in need for replacement due to capacity issue. These 6 inch pipes do not meet the current minimum city standard of 8 inch diameter and do are unlikely to meet fire flow demand requirements. Failing to address these structural and capacity issues may cause service disruption to customer in this area of the city. Known Alternatives: 1. Status Quo / Base Line – This option involves continuing to monitor all segments and to test for adequate fire-flow pressures. 2. Replace the assets using a contractor, city forces, or a combination of both. 9 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Key Project Consideratio ns: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 3. Some of these pipes are 6 inches in diameter, while the minimum city standard is 8 inch diameter. Therefore, there are capacity problems in addition to structural problems. PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The assets are cast iron pipe, which have a design life of 60 years, cement lined cast iron pipe, which have a design life of 80 years, and stainless steel pipe, which has a design life of 120. The pipe segments have no break history that can be determined from Hansen data or staff knowledge. The current condition of the pipe segments is unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to northwest area of the City. These pipes serve commercial customers, including hotels and restaurants. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 10 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality and Capacity. Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues . In addition, some pipes have capacity issues due diameter less than the current minimum city standard of 8 inch diameter. The capacity failure is secondary to the physical mortality failure for this analysis. Timing of Failure The older pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 8 years. The newer pipes have capacity as the imminent failure mode and are expected to in the next 10 years. Consequence of Failure if project not done The consequence of these pipes failing is calculated to be $293,200. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 1,000 residential and 1,100 tourists and commercial customers could be affected with the spilled water for 1 day. However, damages to non-SMWRD assets and property are expected to be minimal. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments and testing for adequate fire-flow pressures. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Three alternatives are considered:  Replace all segments by contractor.  Replace all segments by city forces.  Replace 1st Ct and California Ave with city forces, and Ocean Ave by contractor. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 11 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - continued monitoring of all segments and testing for adequate fire-flow pressures Design Life: 8 Analysis Period: 8 Capital Requirements: $0 Operations Requirements: $4,292 Maintenance Requirements: $4,292 Business Risk Exposure $38,116 Overall Pros There are still a few years of remaining life. Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace all segments by contract Design Life: 100 Analysis Period: 100 Capital Requirements: $717,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $2,932 Overall Pros Extends life of asset. Reduces probability of asset failure. Overall Cons High capital costs. 12 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 3 Summary of Key Points Analysis Area Comment Description: Replace all segments by city forces Design Life: 100 Analysis Period: 100 Capital Requirements: $358,500 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $2,932 Overall Pros Extends life of asset. Reduces probability of asset failure. Less capital cost than contractor replacement. Overall Cons City resources required to complete project. Option 4 Summary of Key Points Analysis Area Comment Description: Replace 1st Ct and California Ave with city forces, Ocean Ave by contractor Design Life: 100 Analysis Period: 100 Capital Requirements: $658,500 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $2,932 Overall Pros Extends life of asset. Reduces probability of asset failure. Overall Cons High capital costs. 13 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option Number Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio 1 Status Quo Analyze 8 - 1,073 1,073 0 8,000 1,000 0 0.0 2 Replace all segments by contract Analyze 100 717,000 - 0 0 737,000 7,370 35,184 0.0 3 Replace all segments by city forces Analyze 100 358,500 - 0 0 368,500 3,685 35,184 0.1 4 Replace 1st Ct and California Ave with city forces, and Ocean Ave by contractor Analyze 100 658,500 - 0 0 678,500 6,785 35,184 0 Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Status Quo 8 Years 13%No Backup 100%13.00%$38,116 $0 2 Replace all segments by contract 100 Years 1%No Backup 100%1.00%$2,932 $35,184 3 Replace all segments by city forces 100 Years 1%No Backup 100%1.00%$2,932 $35,184 4 Replace 1st Ct and California Ave with city forces, and Ocean Ave by contractor 100 Years 1%No Backup 100%1.00%$2,932 $35,184 Project Option Years to Expected Failure Redundancy ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 14 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace all segments by contractor. This option delivers the highest quality construction, but at the highest capital costs. The pipes are believed to be in poor enough condition to warrant replacement and the added consideration of insufficient pipe diameter also warrants replacements. The City does not have the available forces to complete this project in appropriate time. The capital savings are insignificant replace part of the pipes by City forces and part by contractor. This option also reduces the business risk exposure of this asset from over $38,000 to roughly $3,000. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $0 $0 $0 $717,000 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation . LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. 15 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 16 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: Pier Water Main Project Description: The Water Resources Division wishes to eliminate any health risk due to algae growth in the fiberglass pipe that delivers potable water to the pier. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/02/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings Continue to monitor the pipe for algae growth, pipe condition, and water quality to ensure no health risks are present. The current amount of algae is not causing any degradation of water quality. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $138,180 50 2014 $0 $1,692 $1,000 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: The Santa Monica pier houses 2,635 feet of 8 inch fiberglass pipe for potable water distribution. Due to exposure to the environment, primarily direct sunlight, the fiberglass pipe material is prone to algae growth on its interior walls. The algae growth inside the pipe degrades the quality of water and could cause harm if consumed by the public . Known Alternatives: 1. Status Quo / Base Line – This alternative involves continuing to monitor water quality and test for unsafe drinking water quality. 2. Do nothing – Stop all maintenance on the pipe. 3. Replace the pipe using a contractor. 4. Coat the existing pipe to reduce exposure to the environment and direct sunlight. Key Project Considerations: 1. Safety and health are the main concern of this project. The problem does not currently affect public health, but if left untreated, the problem could cause harm to people who drink the water. 2. Cost to replace the main and the associated impact to the pier and public. Replacing the pipe is expensive due to its location and water outages on the pier are costly to the businesses on the pier. 17 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 85 to 95 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is over 2,000 feet of fiberglass pipe assumed to have been installed in 1965. It has a design life of 80 years. Algae is present on the interior walls of portions of pipe. Current Demands (Capacity and Utilization): The current pipe is the only one providing potable water to the pier. This pipe is required to provide water to the pier, the public, restaurants, and businesses. Future Demands (Reliability): The capacity of the pipe will not be increased and no future growth or increased demand will be accommodated as result of this project. FAILURE MODE Prediction of Failure Mode (Reason for Project) Level of service. The existing pipe is prone to algae growth on the interior wall due to exposure to the environment. The water it delivers, when too much algae is present, will not meet water quality standards. This pipe will fail to meet level of service to deliver water that meets water quality standards. Timing of Failure The growth of algae is currently present in the pipe, however, at this time the water is not below drinking water quality. The exact algae concentration that will produce unsafe water quality is unknown, but it is expected within the next 50 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $6,909,000. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 1,000 people will be affected with moderate health issues, 10,000 tourists will be affected by a day of water loss, and $400,000 worth of economic impact will result from legal costs, public image, and fines. 18 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line The base case. It assumes that no changes are made to the ongoing operation and maintenance of the asset. 2. Do Nothing Do nothing to the pipe. 3. Operate Differently N/A 4. Maintain differently N/A 5. Repair N/A 6. Refurbish / Rehabilitation Coating the pipe will extend the time to failure. 7. Replace Replace all segments by contract. 8. Decommission N/A 9. Non Asset Solutions N/A For each option listed above, see the completed tables below. Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo Design Life: 3 Analysis Period: 50 Capital Requirements: $0 Operations Requirements: $0 Maintenance Requirements: $84,579 Business Risk Exposure $138,180 Overall Pros Overall Cons Public health will eventually be affected. 19 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 2 Summary of Key Points Analysis Area Comment Description: Do Nothing Design Life: 3 Analysis Period: 3 Capital Requirements: $0 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $2,279,970 Overall Pros No capital costs. Overall Cons Pipe is not monitored or maintained. Option 3 Summary of Key Points Analysis Area Comment Description: Refurbish / Rehabilitation Design Life: 3 Analysis Period: 20 Capital Requirements: $225,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $345,450 Overall Pros Coating pipe will not disrupt water delivery. Low capital costs. Overall Cons Pipe needs to be re-coated and re-inspected periodically. Does not eliminate algae from pipe. 20 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 4 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 3 Analysis Period: 100 Capital Requirements: $450,000 Operations Requirements: $252,708 Maintenance Requirements: $0 Business Risk Exposure $69,090 Overall Pros Eliminates algae from pipe. No maintenance costs. Pipe install year makes it candidate for replacement based on age. Overall Cons High capital costs. Disrupts water delivery to pier. 21 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio Do Nothing Analyze 3 - - 0 0 0 0 0 Status Quo Analyze 50 - 1,692 1,692 0 50,000 1,000 2,141,790 42.8 Coating Analyze 20 225,000 - 0 0 225,000 11,250 1,934,520 9 Replace Analyze 100 450,000 252,708 0 0 636,850 6,369 2,210,880 3.5 Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Do Nothing 3 Years 33%No Backup 100%33.00%$2,279,970 $0 2 Do Nothing 50 Years 2%No Backup 100%2.00%$138,180 $2,141,790 3 Status Quo 100 Years 1%No Backup 100%1.00%$69,090 $2,210,880 4 Replace 20 Years 5%No Backup 100%5.00%$345,450 $1,934,520 Project Option Years to Expected Failure Redundancy ASSUMPTIONS / COMMENTS Actual pipe installation date is not known. Installation year of 1901 is assumed based on oldest known pipe in the map grid. 22 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option for the fiberglass pipe on the pier is to continue to monitor the pipe for algae growth, pipe condition, and water quality to ensure not health risks are present. The current amount of algae is not causing any degradation of water quality. The cost to coat or replace the pipe is too large to consider them as options. Until health or pipe condition are a known problem, the pipe is acceptable in its current operating state. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $0 $0 $0 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $1,000 $1,020 $1,040 $1,061 $1,082 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation . LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. 23 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 24 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: SE Quadrant Water Main Replacement Project Description: Approximately 3 miles of water main installed in the 1920’s and 1940’s are reaching the end of their useful lives. Some of the pipeline segments are 6 inches in diameter with a questionable fire-flow. The minimum city standard is 8 inches so some adjustments need to be made. WRD would like to take advantage of the opportunity to replace these water main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/15/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings Aggressively monitor the condition of the aging pipes in this area and replace the ones in poor condition. Taking coupons out of pipes to monitor the condition of the assets will help determine the best time to replace the assets. Additionally, SMWRD will begin to put aside $900,000 per year for each of the next 5 years in preparation for the capital costs needed to replace these pipes. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $37,550 10 2020 $0 $1,095 $1,000 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Approximately 14,600 feet (2.76 miles) of water main installed in the 1920’s and 1940’s are reaching the end of their useful lives. Some of the pipeline segments are 6 inches in diameter with a questionable fire-flow. The minimum city standard is 8 inches so some adjustments need to be made. 25 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Known Alternatives: 1. Aggressive monitoring of all segments and replace segments as needed. 2. Replace all segments as a form of precautionary maintenance. 3. Replace 6-inch segments only and aggressive monitoring of other segments. 4. Do Nothing. Although considered an alternative, it is not a viable city option. It will not be considered in the analysis. 5. Trenchless replacement of all segments. Although considered an alternative, it is not a viable city option. It will not be considered in the analysis. 6. Rehabilitate 12-inch segments only. Not a viable option for 6 and 8-inch segments since they would not meet current City standards. This will not be considered because of the age of pipe segments. Key Project Considerations: 1. Monitoring options rely on the ability to track pipe condition with coupons. PROJECT BACKGROUND Existing Standards of Service: The southeastern quadrant of San Monica contains a mixture of commercial and residential properties. The current pipes deliver 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The assets are a mixture of CIP and stainless steel water mains of 6, 8, and 12-inch diameters totaling 14,583 feet (2.76 miles). Pipe installations range from 1924 to 2004, pipe conditions are currently unknown, and pipe break histories are infrequent. Current Demands (Capacity and Utilization): The pipes are spread throughout the distribution system, providing potable water to commercial and residential properties. They meet current customer demand; however, they do not meet current fire flow requirements. Future Demands (Reliability): All 6-inch pipes will be upgraded to 8-inch when replaced to accommodate for future growth in the area and to provide the necessary fire flow requirements of the area. 26 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality. The majority of the pipes were installed in the 1924 and reaching their design life. Timing of Failure Design life of the pipes is 80-100 years. The oldest pipes are 87 years old. Failure is expected within 10 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $375,500. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 100 customers would be without water, electricity, and telecommunications for a day and $200,000 worth of damage to non-SMWRD assets and $100,000 worth of bad publicity due to a major water break. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line Aggressively monitor segments and repair / replace as needed. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contract. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 27 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summaries of Key Points (one for each option) Analysis Area Comment Description: Status Quo –Aggressively monitor segments and repair / replace as needed. Design Life: 10 Analysis Period: 10 Capital Requirements: $0 Operations Requirements: $0 Maintenance Requirements: $10,950 Business Risk Exposure $37,550 Overall Pros Overall Cons No indication of when mains might break. High costs to repair / replace pipe after break occurs. Option 2 Summaries of Key Points (one for each option) Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $4,500,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $3,755 Overall Pros Proactive replacement of pipes eliminates risk of unexpected pipe failure. Overall Cons High capital costs. Pipes may not be in poor condition and may not need replacing unless condition assessment is done. 28 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option Number Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio 1 Status Quo Analyze 10 - 1,095 1,095 0 10,000 1,000 0 0.0 2 Replace Analyze 100 4,500,000 - 0 0 4,520,000 45,200 33,795 0.0 Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Status Quo 10 Years 10%No Backup 100%10.00%$37,550 $0 2 Replace 100 Years 1%No Backup 100%1.00%$3,755 $33,795 Project Option Years to Expected Failure Redundancy ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 29 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to aggressively monitor the condition of the aging pipes in this area and replace the ones in poor condition. This option reduced the capital costs of replacing all the pipes in the area over a certain age. Since not all the pipe installation dates are known, some newer pipes might be replaced unnecessarily. Taking coupons out of pipes to monitor the condition of the assets will help determine the best time to replace the assets. Additionally, SMWRD will begin to put aside $900,000 per year for each of the next 5 years in preparation of the capital costs needed to replace the pipes in this area. These funds will be used to pay for pipe replacements during or after this 5 year period. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $900,000 $900,000 $900,000 $900,000 $900.000 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $1,000 $1,020 $1,040 $1,061 $1,082 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. 30 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 31 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: SW Quadrant Water Main Replacement - Ocean Front Project Description: Cast iron water main lines, totalling 7,000 feet, installed in the 1900’s and 1950’s are reaching the end of their useful lives. Some of the p ipeline segments are 6 inch diameter and don’t meet current fire flow demand. WRD would like to take advantage of the opportunity to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $518,463 to roughly $15,711. It also extends asset service life to another 100 years. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $15,711 3 2013 $2,100,000 $0 $210,200 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Cast iron water main lines along the oceanfront in the southwest quadrant of Santa Monica are reaching the end of their useful lives. Approximately 7,000 feet (1.3 miles) of pipe, installed in 1900’s and 1950’s, is facing structural problems. Failing to address these structural issues may cause service disruptions to customers and possible spills onto the beach. Known Alternatives: 1. Status quo - Continue to monitor all segments and perform fire-flow testing. 2. Replace all segments. 32 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Key Project Considerations: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 3. Some of the pipes are 6 inch diameter, while the minimum city standard is 8 inch diameter. Therefore, there are capacity problems in addition to structural problems. 4. Scheduling conflicts might occur. CEQA could add additional 3 months to project schedule. Also, no work permitted between Memorial Day and Labor Day (summer season). PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is a cast iron pipe. It has a design life of 80 years. These segments of water main have no break history that can be determined from Hansen data or staff knowledge. The current conditions of the pipe segments are unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to southwest area of the City. These pipes serve commercial customers, including hotels and restaurants near the beach. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 33 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality: Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues. Timing of Failure The age of the cast iron pipes range from 60 to 110 years old, with an expected life of 80 years. The older pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 5 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $1,571,100. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 1,000 commercial customers could be affected by water, electricity and telecommunication service disruption for 1 day. A $1,000,000 worth of damage to non-SMWRD assets and property is expected if a failure occurs. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments and testing for adequate fire-flow pressures. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contract. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 34 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - This option involves continued monitoring of all segments and testing for adequate fire-flow pressures. Design Life: 3 Analysis Period: 3 Capital Requirements: $0 Operations Requirements: $1,530 Maintenance Requirements: $1,530 Business Risk Exposure $518,463 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $2,100,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $15,711 Overall Pros Extended life of asset. Reduced probability of asset failure. Overall Cons High capital costs. 35 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Business Risk Exposure Comparison: ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 36 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $518,463 to roughly $15,711. It also extends asset service life to another 100 years. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $0 $2,100,000 $0 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. 37 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 38 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation 39 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: SW Quadrant Water Main Replacement - Inland Project Description: Cast iron water main lines, totalling 3,483 feet, installed in the 1900’s and 1950’s are reaching the end of their useful lives. Some of the p ipeline segments are 6 inch diameter and don’t meet current fire flow demand. WRD would like to take advantage of the opportunity to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $135,100 to roughly $6,755. It also extends asset service life to another 100 years. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $6,755 5 2014 $1,044,900 $0 $10,649 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Cast iron water main lines in inland portion of the southwest quadrant of Santa Monica are reaching the end of their useful lives. The 3,483 feet (.7 miles) of pipe, installed in 1900’s and 1950’s, is facing structural problems. Failing to address these issues may cause service disruptions to customers in this area of the city. Known Alternatives: 1. Status quo - Continue to monitor all segments and perform fire-flow testing. 2. Replace all segments. Key Project Considerations: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 40 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is a cast iron pipe. It has a design life of 80 years. These segments of water main have no break history that can be determined from Hansen data or staff knowledge. The current conditions of the pipe segments are unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to southwest area of the City. These pipes serve commercial customers, including hotels and restaurants. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 41 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality: Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues. Timing of Failure The age of the cast iron pipes range from 60 to 110 years old, with an expected life of 80 years. The older pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 5 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $675,500. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 100 commercial customers could be affected by water, electricity and telecommunication service disruption for 1 day. An estimated $500,000 worth of damage to non-SMWRD assets and property is expected if a failure occurs. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments and testing for adequate fire-flow pressures. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contract. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 42 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - This option involves continued monitoring of all segments and testing for adequate fire-flow pressures. Design Life: 5 Analysis Period: 5 Capital Requirements: $0 Operations Requirements: $2,602 Maintenance Requirements: $2,602 Business Risk Exposure $135,100 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $1,044,900 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $6,755 Overall Pros Extends life of asset. Reduces probability of asset failure. Overall Cons High capital costs. 43 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Business Risk Exposure Comparison: ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 44 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $135,100 to roughly $6,755. It also extends asset service life to another 100 years. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $0 $0 $1,044,900 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation . LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. 45 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 46 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation 47 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: NE Quadrant Water Main Replacement – Broadway Project Description: Cast iron water main lines, approximately 5,000 feet installed in the 1920’s and 1950’s, are reaching the end of their useful lives. WRD would like to take advantage of the opportunity to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $2,032,400 to roughly $203,240. It also extends asset service life to another 100 years. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $203,240 10 2013 $1,500,000 $0 $1,829,160 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Cast iron water main lines along Broadway in the northeast quadrant of Santa Monica are reaching the end of their useful lives. Approximately 5,000 feet (1 mile) of pipe, installed in 1920’s and 1950’s, is facing structural problems. Failing to address these structural issues may cause service disruptions to customers in this area of the city. Known Alternatives: 1. Status quo - Continue to monitor all segments and perform fire-flow testing. 2. Replace all segments. Key Project Considerations: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 48 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation 3. Some of the pipes are 6 inch diameter, while the minimum city standard is 8 inch diameter. Therefore, there are capacity problems in addition to structural problems. PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is a cast iron pipe. It has a design life of 80 years. These segments of water main have no break history that can be determined from Hansen data or staff knowledge. The current conditions of the pipe segments are unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to northeast area of the City. These pipes serve commercial customers, including hotels, shops, and restaurants along Broadway. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 49 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality. Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues. Timing of Failure The age of the cast iron pipes range from 60 to 90 years old, with an expected life of 80 years. The pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 10 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $20,324,000. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 10,000 commercial customers could be affected by water spilled for 1 day and electricity and telecommunication service disruption for 3 days. Due to its location, a $10,000,000 worth of damage to non-SMWRD assets and property is expected if a failure occurs. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contractor. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 50 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - This option involves continued monitoring of all segments. Design Life: 10 Analysis Period: 10 Capital Requirements: $0 Operations Requirements: $5,475 Maintenance Requirements: $5,475 Business Risk Exposure $2,032,400 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $1,500,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $203,240 Overall Pros Extends life of asset. Reduces probability of asset failure. Overall Cons High capital costs. 51 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option Number Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio 1 Status Quo Analyze 10 - 1,095 1,095 0 10,000 1,000 0 0.0 2 Replace Analyze 100 1,500,000 - 0 0 1,520,000 15,200 1,829,160 1.2 Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Status Quo 10 Years 10%No Backup 100%10.00%$2,032,400 $0 2 Replace 100 Years 1%No Backup 100%1.00%$203,240 $1,829,160 Project Option Years to Expected Failure Redundancy ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 52 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $2,032,400 to roughly $203,240. It also extends asset service life to another 100 years. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $1,500,000 $0 $0 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. 53 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 54 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: NE Quadrant Water Main Replacement – City Forces Project Description: Six segments of cast iron water main lines, varying in length (approximately 3,500 feet) and installed in the 1920’s and 1950’s, are reaching the end of their useful lives. WRD would like to take advantage of the opportunity to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace all segments with city forces. This option reduces the business risk exposure of this asset from over $2,440,800 to roughly $24,408. It also extends asset service life to another 100 years. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $24,408 6 2012 $581,250 $0 $6,413 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Cast iron water main lines in various locations of the northeast quadrant of Santa Monica (listed below) are reaching the end of their useful lives. These pipes are facing structural issues and failing to address these structural issues may cause service disruptions to customers in this area of the city. The locations and lengths of these pipes are:  Santa Monica Place South from 26th St to Harvard Ct – approximately 1000 feet installed in 1920s.  20th Ct from Arizona to Wilshire – approximately 650 feet installed in 1950s.  Euclid Ct from California to Wilshire – approximately 600 feet installed in 1920s.  14th St from California to Washington – approximately 675 feet installed in 1920s.  Montana from 15th Ct to 17th S – approximately 600 feet installed in 1920s.  Idaho from 23rd Ct to 24th Ct – approximately 350 feet installed in 1920s. 55 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Known Alternatives: 1. Status quo - Continue to monitor all segments and perform fire-flow testing. 2. Replace all segments with city forces. Key Project Considerations: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 3. Some of the pipes are 6 inch diameter, while the minimum city standard is 8 inch diameter. Therefore, there are capacity problems in addition to structural problems. PROJECT BACKGROUND Existing Standards of Service: The current pipes deliver PSIs, which meet current levels of service. Knowledge of Existing Asset and/or Facility: The assets are cast iron pipes. They have a design life of 80 years. These segments of water main have no break history that can be determined from Hansen data or staff knowledge. The current conditions of the pipe segments are unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to northeast area of the City. These pipes serve commercial and residential customers. Future Demands (Reliability): New pipe replacements would extend the service life of these segments of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 56 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality. Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues. Timing of Failure The age of the cast iron pipes range from 60 to 90 years old, with an expected life of 80 years. The pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 6 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $2,440,800. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 100 commercial customers could be affected by road closures for 1 day. Due to the location, $2,000,000 worth of damage to non-SMWRD property and $300,000 worth of legal fees is expected if a failure occurs. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by city forces. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 57 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - This option involves continued monitoring of all segments. Design Life: 10 Analysis Period: 10 Capital Requirements: $0 Operations Requirements: $5,475 Maintenance Requirements: $5,475 Business Risk Exposure $407,614 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace all segments with city forces Design Life: 100 Analysis Period: 100 Capital Requirements: $581,250 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $24,408 Overall Pros Extended life of asset. Reduced probability of asset failure. Overall Cons High capital costs. 58 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option Number Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio 1 Status Quo Analyze 10 - 1,095 1,095 0 10,000 1,000 0 0.0 2 Replace • Santa Monica Place South from 26th St to Harvard Ct Analyze 100 150,000 - 0 0 160,000 1,600 383,206 2.4 3 Replace • 20th Ct from Arizona to Wilshire Analyze 100 97,500 - 0 0 107,500 1,075 383,206 3.6 4 Replace • Euclid Ct from California to Wilshire Analyze 100 90,000 - 0 0 100,000 1,000 383,206 4 5 Replace • 14th St from California to Washington Analyze 100 101,250 - 0 0 111,250 1,113 383,206 3.4 6 Replace • Montana from 15th Ct to 17th St Analyze 100 90,000 - 0 0 100,000 1,000 383,206 3.8 7 Replace • Idaho from 23rd Ct to 24th Ct Analyze 100 52,500 - - 0 62,500 625 383,206 6.1 *The Options in the table do not represent alternatives. This evaluation treats the replacement of all assets as one alternative to Status Quo. The individual segments were separated in the Life Cycle Cost Comparison in order to price each replacement separately and in the appropriate year. Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Status Quo 6 Years 17%No Backup 100%16.70%$407,614 $0 2 Replace • Santa Monica Place South from 26th St to Harvard Ct 100 Years 1%No Backup 100%1.00%$24,408 $383,206 3 Replace • 20th Ct from Arizona to Wilshire 100 Years 1%No Backup 100%1.00%$24,408 $383,206 4 Replace • Euclid Ct from California to Wilshire 100 Years 1%No Backup 100%1.00%$24,408 $383,206 5 Replace • 14th St from California to Washington 100 Years 1%No Backup 100%1.00%$24,408 $383,206 6 Replace • Montana from 15th Ct to 17th St 100 Years 1%No Backup 100%1.00%$24,408 $383,206 7 Replace • Idaho from 23rd Ct to 24th Ct 100 Years 1%No Backup 100%1%$24,408 $383,206 Project Option Years to Expected Failure Redundancy 59 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace all segments with city forces. This option reduces the business risk exposure of this asset from over $2,440,800 to roughly $24,408. It also extends asset service life to another 100 years. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $52,500 $240,000 $191,250 $0 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. 60 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 61 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: NE Quadrant Water Main Replacement – Wilshire Project Description: Cast iron water main lines, approximately 2,000 feet installed in the 1950’s, are reaching the end of their useful lives. WRD would like to take advantage of the opportunit y to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace the pipes. This option reduces the business risk exposure from over $300,000 to roughly $23,000. It also extends asset service life to another 100 years . Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $23,590 8 2015 $600,000 $0 $6,200 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Cast iron water main lines along Wilshire in the northeast quadrant of Santa Monica are reaching the end of their useful lives. Approximately 2,000 feet (0.4 mile) of pipe, installed in 1950’s, is facing structural problems. Failing to address these structural issues may cause service disruptions to customers in this area of the city. Known Alternatives: 1. Status quo - Continue to monitor all segments and perform fire-flow testing. 2. Replace all segments. Key Project Considerations: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 62 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation 3. Some of the pipes are 6 inch diameter, while the minimum city standard is 8 inch di ameter. Therefore, there are capacity problems in addition to structural problems. PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 115 to 125 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is a cast iron pipe. It has a design life of 80 years. These segments of water main have no break history that can be determined from Hansen data or staff knowledge. The current conditions of the pipe segments are unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to northeast area of the City. These pipes serve commercial customers, including hotels, shops, and restaurants along Wilshire. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 63 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality: Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues. Timing of Failure The age of the cast iron pipes are roughly 60 years old, with an expected life of 80 years. The pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 8 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $2,359,000. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 1000 commercial customers could be affected by road closure for 1 day. A $2,000,000 worth of damage to non- SMWRD assets and property is expected if a failure occurs. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contractor. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 64 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - This option involves continued monitoring of all segments. Design Life: 8 Analysis Period: 8 Capital Requirements: $0 Operations Requirements: $4,292 Maintenance Requirements: $4,292 Business Risk Exposure $306,670 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $600,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $23,590 Overall Pros Extends life of asset. Reduces probability of asset failure. Overall Cons High capital costs. 65 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio Status Quo Analyze 8 - 1,073 1,073 0 8,000 1,000 0 0.0 Replace Analyze 100 600,000 - 0 0 620,000 6,200 283,080 0.5 Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Status Quo 8 Years 13%No Backup 100%13.00%$306,670 $0 2 Replace 100 Years 1%No Backup 100%1.00%$23,590 $283,080 Project Option Years to Expected Failure Redundancy ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 66 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace the pipes. This option reduces the business risk exposure from over $300,000 to roughly $23,000. It also extends asset service life to another 100 years . Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $0 $0 $600,000 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. 67 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 68 8614014 City of Santa Monica Water Resources Division Five Year Capital Improvement Program Business Case Evaluations GHD Inc. 16451 Scientific Way Irvine, CA 92618 T: 1 949 250 0501 F: 1 949 250 0541 E: irvmail@ghd.com © GHD Inc. 2011 This document may only be used for the purpose for which it was commissioned and in accordance with the Terms of Engagement for the commission. Unauthorized use of this document in any form whatsoever is prohibited. Document Status Rev No.Author Reviewer Approved for Issue Name Signature Name Signature Date B i d d e r ’ s N a m e : M i c h e l s P i p e l i n e C o n s t r u c t i o n ; ( e n t e r o n e a c h b i d f o r m p a g e ) • a d i v i s i o n o f M i c h e l s C o r p o r a t i o n C I T Y O F S A N T A M O N I C A O A K S I N I T I A T I V E D I S C L O S U R E F O R M S n i . I n h . I n o r d e r t o f a c i l i t a t e c o m p l i a n c e w i t h t h e r e q u i r e m e n t s o f t h e O a k s I n i t i a t i v e , t h e C i t y c o m p i l e s a n d m a i n t a i n s c e r t a i n i n f o r m a t i o n . T h a t i n f o r m a t i o n i n c l u d e s t h e n a m e o f a n y p e r s o n o r p e r s o n s w h o i s s e e k i n g a “ p u b l i c b e n e f i t . I f t h e “ p u b l i c b e n e f , t i s s o u g h t b y a n e n t i t y , r a t h e r t h a n a n i n d i v i d u a l p e r s o n , t h e i n f o r m a t i o n i n c l u d e s t h e n a m e o f e v e r y p e r s o n w h o i s : ( a ) t r u s t e e , ( b ) d i r e c t o r , ( c ) p a r t n e r , ( d ) o f f i c e r , o r h a s ( e ) m o r e t h a n a t e n p e r c e n t i n t e r e s t i n t h e e n t i t y . P u b l i c b e n e f i t s i n c l u d e : 1 . P e r s o n a l s e r v i c e s c o n t r a c t s i n e x c e s s o f $ 2 5 , 0 0 0 o v e r a n y 1 2 - m o n t h p e r i o d ; 2 . s a l e o f m a t e r i a l , e q u i p m e n t o r s u p p l i e s t o t h e C i t y i n e x c e s s o f $ 2 5 , 0 0 0 o v e r a 1 2 - m o n t h p e r i o d ; 3 . P u r c h a s e , s a l e o r l e a s e o f r e a l p r o p e r t y t o o r f r o m t h e C i t y i n e x c e s s o f $ 2 5 , 0 0 0 o v e r a 1 2 - m o n t h p e r i o d ; 4 . N o n - c o m p e t i t i v e f r a n c h i s e a w a r d s w i t h g r o s s r e v e n u e o f $ 5 0 , 0 0 0 o r m o r e i n a n y 1 2 - m o n t h p e r i o d ; 5 . L a n d u s e v a r i a n c e , s p e c i a l u s e p e r m i t , o r o t h e r e x c e p t i o n t o a n e s t a b l i s h e d l a n d u s e p l a n , w h e r e t h e d e c i s i o n h a s a v a l u e i n e x c e s s o f $ 2 5 , 0 0 0 ; 6 . T a x “ a b a t e m e n t , e x c e p t i o n , o r b e n e f i t ” o f a v a l u e i n e x c e s s o f S 5 , 0 0 0 i n a n y 1 2 - m o n t h p e r i o d ; o r 7 . P a y m e n t o f “ c a s h o r s p e c i e ” o f a n e t v a l u e t o t h e r e c i p i e n t o f $ 1 0 , 0 0 0 i n a n y 1 2 - m o n t h p e r i o d . N a m e ( s ) o f p e r s o n s o r e n t i t i e s r e c e i v i n g p u b l i c b e n e f i t : N 7 A L b l , 4 ; d ’ t e ’ { s C 0 t f 0 f l b i N a m e ( s ) o f t r u s t e e s , d i r e c t o r s , p a r t n e r s , a n d o f f i c e r s : - , _ p w k ” 1 ’ * ç i c J c t r , j - 0 c i r . s k r o e d c r , g e v P M c u i t C Ø M f l ( 2 a O I t 4 i 0 L ’ o f B o a r o { t j f r € C f - r t i C R e g i o n a l M a n a g e r - W e s t e r n T i t l e : O p e r a t i o n s D a t e : J u l y 3 , 2 0 1 8 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ P h o n e : ( 9 2 0 ) 9 2 4 - 4 3 0 0 P e r m i t # _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ P r e p a i N a m e ( s ) o f p e r s o n s w i t h m o r e , t h a n a 1 0 % e q u i t y , p a r t i c i p a t i o n o r r e v e n u e i n t e r e s t : p a t r i O t C b . M i c J . e ’ I S , e v ! t i C . c 2 v # y M r O t ’ E m a i l : j s o I i s m i c h e 1 s . u s F O R C I T Y U S E O N L Y : B i d / p o / C o n t r a c t # _ _ _ _ _ _ _ _ _ B i d F o r m - A p r i l 2 0 , 2 0 1 8 4 4 I P a g C O N S E N T R E S O L U T I O N O F T H E B O A R D O F D I R E C T O R S O F M I C H E L S C O R P O R A T I O N J A N U A R Y 2 , 2 0 1 8 T h e u n d e r s i g n e d , b e i n g a l l o f t h e D i r e c t o r s o f M I C H E L S C O R P O R A T I O N , a W i s c o n s i n c o r p o r a t i o n , p u r s u a n t t o S e c t i o n 1 8 0 . 0 8 2 1 o f t h e W i s c o n s i n S t a t u t e s , d o h e r e b y c o n s e n t t o t h e f o l l o w i n g a c t s t a k e n w i t h o u t a m e e t i n g : R E S O L V E D : t h a t a n y o f t h e f o l l o w i n g e l e c t e d o f f i c e r s a n d a p p o i n t e d m a n a g e r s s h a l l h a v e t h e a b i l i t y t o n e g o t i a t e a n d e x e c u t e c o n t r a c t s a n d a g r e e m e n t s o n b e h a l f o f M i c h e l s P i p e l i n e C o n s t r u c t i o n , a d i v i s i o n o f M i c h e l s C o r p o r a t i o n , f o r t h e f i s c a l y e a r e n d i n g D e c e m b e r 3 1 , 2 0 1 8 , o r u n t i l t h e i r r e s p e c t i v e s u c c e s s o r s h a v e b e e n e l e c t e d a n d q u a l i f i e d : S e n i o r V i c e P r e s i d e n t , P i p e l i n e O p e r a t i o n s V i c e P r e s i d e n t , P i p e l i n e D i v i s i o n O p e r a t i o n s V i c e P r e s i d e n t , C o n t r a c t A d m i n i s t r a t i o n & S p e c i a l P r o j e c t s V i c e P r e s i d e n t , W e s t e r n O p e r a t i o n s G e n e r a l M a n a g e r , E s t i m a t i n g & P r o j e c t C o n t r o l s G e n e r a l M a n a g e r , F a c i l i t i e s C o n s t r u c t i o n G e n e r a l M a n a g e r , G a s D i s t r i b u t i o n G e n e r a l M a n a g e r , C e n t r a l R e g i o n A s s i s t a n t S e c r e t a r y & D i v i s i o n C o n t r o l l e r D a t e d t h i s 2 n d d a y o f J a n u a r y . 2 0 1 8 . R o b e r t C . O s b o r n M a t t h e w J . W e s t p h a l D a v i d B r i s t o l B e n j a m i n G . N e l s o n B e n j a m i n P l o e d e r l E r i c J u s t m a n P e t e F o j t i k K y l e M e l c h e r D a n i e l R . S c h w a r t z R u t h L . M i c h e ( s , D i r e c t o r P a t r i c k D . M i c h e l s , D i r e c t o r C O N S E N T R E S O L U T I O N O F T H E B O A R D O F D I R E C T O R S O F M I C H E L S C O R P O R A T I O N J U N E 2 0 , 2 0 1 8 T h e u n d e r s i g n e d , b e i n g t h e B o a r d o f D i r e c t o r s o f M I C H E L S C O R P O R A T I O N , a W i s c o n s i n c o r p o r a t i o n , p u r s u a n t t o S e c t i o n 1 8 0 0 8 2 1 o f t h e W i s c o n s i n S t a t u e s , d o h e r e b y c o n s e n t t o t h e f o l l o w i n g a c t s t a k e n w i t h o u t a m e e t i n g : R E S O L V E D t h a t M i c h a e l L i ! m a t a i n e n , G e n e r a l M a n a g e r W e s t e r n O p e r a t i o n s o f M i c h e l s C o r p o r a t i o n s h a l l h a v e t h e a u t h o r i t y t o l e g a l l y n e g o t i a t e a n d e x e c u t e b o n d s a n d b i d d o c u m e n t s R E S O L V E D : t h a t J o h n S o i l s , R e g i o n a l M a n a g e r W e s t e r n O p e r a t i o n s o f M i c h e l s C o r p o r a t i o n s h a l l h a v e t h e a u t h o r i t y t o l e g a l l y n e g o t i a t e a n d e x e c u t e b o n d s a n d b i d d o c u m e n t s . D a t e d t h i s 2 0 t h d a y o f J u n e , 2 0 1 8 a t B r o w n s i I l e , W i s c o n s i n . - j / 7 / / , h i . / / / _ L m R u f h L . M i c h e l s , D i r e c ? o r P a t r i c k D , M i c h e l s , D i r e c t o r REFERENCE: Contract No. 10733 (CCS)